AUSSIE BONDS: Solid Rally, RBA Hike Next Week At ~85% Chance

"*RBA RAISES CASH RATE TARGET BY 25BPS TO 4.60%; EST. 4.60%" - BBG

Unanimous decision as inflation remains elevated. Future decisions to rely on data and risk assessment

Ongoing elevated uncertainty over a US-Iran agreement to reopen the Strait of Hormuz continues to support oil prices despite news that about 3.5mbd, around half, are again flowing through Saudi’s east-west pipeline. Brent is 1.8% higher at $107.17/bbl today, close to the intraday high, while WTI is up 1.7% to $94.14/bbl. Both remain below bull triggers at $109.97 and $101.69 respectively.

• Following the US’ rejection of Iran’s Hormuz proposal, Iran wouldn’t soften its demands. However, Iran’s IRNA reported that negotiators had met with Qatari mediators to discuss ideas to be presented to the US. Iran’s foreign minister hopes to have a response Tuesday but he reiterated there is no flexibility on its peaceful use of nuclear. He also said their conditions on Hormuz are “clear”.
• Industry-based US inventory data is published later on Tuesday with diesel stocks of particular interest given talk of an export ban given global shortages driven by refining disruptions.
• Later the Fed’s Bowman, Barr, Goolsbee, Musalem, Williams and Waller speak as well as the ECB’s Lagarde, Cipollone, Lane and Vujčić. US July housing data, August JOLTS job openings, September Conference Board consumer confidence and Dallas Fed services are released. Preliminary September Spanish CPI, September European Commission survey and August UK lending also print.

Spot USD/CNH maintains a softer bias, the pair last near 6.7065/70, slightly up from session lows (6.7056). It leaves CNH up a touch versus the USD for the session, but still outperforming a firmer USD index backdrop (BBDXY through 1217). Onshore spot is around 6.7050 currently. Both pairs will be focused on another downside test sub 6.7000, albeit one that may struggle with still elevated/supportive USD index levels. The earlier USD/CNY fix also nudged a little higher.  As we noted earlier, focus is likely to rest on key crosses (EUR/CNH scope to test 7.6000 on the downside). 

• Recent highs were around 6.7260 for USD/CNH, while the 50-day EMA resistance point comes in near 6.7300. 
• Note we China markets in tomorrow, before before out for national Day celebrations in the first part of Oct (out from this Thursday, Oct 1, to Oct 8, next Thursday). RTRS notes: "The Chinese yuan strengthened against the US dollar on Tuesday, as exporters ramped up conversion of their dollar holdings into the local currency ahead of the National Day holiday, offsetting pressure from a firm greenback that hovered near a two-month high." This is also likely lending support.
• Tomorrow we get the official and RatingDog PMIs for Sep. The official manufacturing print is forecast at 50.1, versus 49.8 prior. The RatingDog manufacturing measure is also seen ticking up to 51.7 from 51.5 prior.